The Silicon Valley Culture

Section 16 from “Reinventing Societal Infrastructure with Technology” which will be released the end of January. I will be posting a new section daily. Please share your feedback as this is a work in progress.

I’m very optimistic about Silicon Valley. The way to look at Silicon Valley is to ask “How many new things are starting up?”. It is especially important in contrasting it to the rest of the world. The rest of the world thinks they know what’s important, but the Silicon Valley psyche (to me, Silicon Valley is a culture not a place and is starting to spread into many parts of the world from Shanghai, Bangalore, Helsinki to Tel Aviv) is to be open-minded. It means to discover and not assume, learn not know, be unreasonable but pragmatic, and determined in not giving up when the going gets rough. It is not being foolish and yet foolish enough to try things others won’t, to be naive enough to not be dissuaded easily, ask fundamental questions around “Why not?”, and not “How has it been done before or tried before?”….

Ask anyone in Washington or Wall Street or any other institutional agent what’s important in energy, in climate? It’s General Electric and Siemens. I’d give you odds that no large innovation will come out of any institutional player. Silicon Valley doesn’t know what’s important either, but what Silicon Valley does really, really well is to originate interesting experiments.

You think Uber is a mess. I think of Uber as having started the change in our notion of transportation and started with a limo service at the very high-end; just like AirBnB started with brokering rooms in Philadelphia in 2008 during the Democratic National Convention. That seed of an idea ends up being way more important than Hilton Hotels after almost a hundred years since they have been around. That’s what is crucial. To me, that is what’s really most important about Silicon Valley. While the world thinks they know what’s important; that Volkswagen or General Motors is important to innovation in cars when the fact is they’re largely irrelevant to innovation. It is “some improbable” that really matters.

That improbable initially was Tesla, but will be supercharged by the Google/Waymo and the Uber experiments. The combination almost certainly will upend public transportation in the future. It will enable anywhere to anywhere ride on-demand for $1 in most cities in America with public transportation while providing better service and lower cost than any public transit service of consequence. Incidentally, it may remove the need for large-scale city parking spots and open space for parks or housing. It may shrink distances and commutes, eliminate more than half the auto industry and its needs for steel and rubber, and collateral GDP! This loss of GDP (near zero if service is free or near free like libraries or information search are today) will be a good thing.

I will even admit that Silicon Valley driven change will sometimes be scaled because of or by large companies, but the initiation of new directions is what is socially important. You know, Volkswagen’s not going to reinvent transportation. Big companies do help scale innovations and bring gobs of capital later when risk of a new phenomenon is low (Walmart in retail?), but they’d rather stay safe and not be wrong. Uber can get lots of flack. Nevertheless, the fundamental innovation they have caused is what Uber started, Tesla started. What Google started with Waymo and driverless cars will completely replace all public transportation with what is the new style of public transportation. This seemed completely inconceivable five years ago by anyone in auto or transportation businesses and inconceivable coming from and driven by any large institutional thinking.

Self-driving cars and even electrics were fifty years away until Waymo asked “Why?”! What will be interesting and completely unpredictable is whether cities will run it, like they do public transportation or will they contract it out to a Waymo or a Google or a Tesla, or somebody else. In 2004, I gave a talk titled “The device that used to be a phone” (I had stolen that title idea from somebody but not sure who) and I got right the basic idea that a phone would not be used mostly for talking, but what I got embarrassingly wrong was the cases it would be used for. I was wrong in unimportant ways, but spot on in the most important trends, the general direction of other uses for a mobile device. This is the essence of Silicon Valley, and why reinvention will be driven by Silicon Valley and not the institutions we rely on and take comfort in.

What people confuse outside of Silicon Valley is this notion, that I’m almost certain of, that the big guys are unimportant to real “big step” innovation. What’s hard to say is the opposite. Improbable, like Uber was, or AirBnB was, or Google was in 1998 is not unimportant. In fact, the only thing that’s probably important is the improbable. We have no way of telling which improbable is important. And because Silicon Valley runs so many experiments and people love to write about all the failures, the hubris, the messes, the trivial, the fraudulent, or self-aggrandizing claims because they, Uber, Theranos, Juicero, Soylent, make best headlines. These same factors are critical to get the self-delusional attempts at grandiose or evolutionary innovation. If these entrepreneurs had normal expectations, they would not attempt the things they do attempt. As Martin Luther King Jr. said, “human progress depends upon the socially maladjusted”. And George Bernard Shaw said that reasonable people adapt themselves to the world, the unreasonable man (he should have added “and woman” but he didn’t) adapts the world to them. Hence, human progress depends upon the unreasonable man or woman.

Writers can write about or rail against or laugh at all the naive attempts, the hubris, the pretend unicorn valuations and the vast amount of drama that is Silicon Valley. However, all these things are largely irrelevant in the long run. They do keep the media in business though with salacious content! Yes, investors get mislead or just plain lose their money. Yes, they cause false hopes and even collateral damage to helpful institutions. But it’s the 1 percent or even 0.1 percent that succeed that cause the majority of technology-driven change in society.

All I’m saying is startups drive the vast majority of innovation, not the institutional incumbents. It is this non-institutional driven change that frees us from the straitjacket of conventional wisdom and lets us really change the world. The experts that inhabit this world are experts in a previous version of the world and live by extrapolation. They do not aim at inventing a new future and as skeptics never do the seemingly impossible. Great entrepreneurs, and there are plenty of incremental ones too that do good work, invent the future they want. I would also state without proof but with plenty of experience across many industries, from Wall Street to more mainstream businesses, that Silicon Valley entrepreneurs have a larger percentage of people who are mission-driven, whether the mission is societal or local or silly, than most other businesses I have seen. Though it is important to acknowledge that Silicon valley has its good and bad apples, and public scrutiny will help improve things. And that it’s generally positive impact has many downsides we must consider and worry about as discussed in one dimension in “AI: Scary for the Right Reasons”.

It is these improbable sounding experiments that are really, really important about Silicon Valley. What is becoming even more exciting and healthy isn’t IPO’s, but the number of new areas the Valley is attempting to innovate in. A few years ago, we invested in this hamburger company Impossible Foods. Now, there ares probably forty or fifty PHDs and another probably forty or fifty other technologists working on designing the perfect hamburger. Why? The founders have started it, because thirty to fifty percent of our planet’s land area (and until Elon Musk gets us to Mars, this is the only planet we have) is dedicated to animal husbandry, and he wanted an environmental better way of producing meat. In addition to other practices, he wants to avoid cruelty to animals, unhealthy food, environmental degradation, antibiotics in our food chain, etc. He wanted a couple of million dollars to run an experiment. Could he do this? This kind of entrepreneur is the core of the SIlicon Valley culture and though there are others abusing the public trust as has been widely and accurately reported, there is far more good than bad in this culture. There are good and bad people in any culture but Silicon Valley feels to me much more mission-driven than most other cultures.

It’s now gotten into a robust product that’s today a niche product, but the goal, clearly, for the founder, is to replace all animal husbandry. You are not going to get that from Cargill or Archer Daniels Midland or Chevron or Exxon. They won’t innovate because they don’t really care as much about the mission of a sustainable planet, despite their proclamations and Madison Avenue ads saying the contrary. And this disruption may disrupt their income statements. To be fair, anything else goes against their promise to their shareholders.

Do you think you could have innovation outside of this region? The one thing to realize is innovation can happen anywhere and everywhere. It is much more about the mindset and a culture than it is about a place. What makes it harder in other places is that when somebody innovates, they don’t get that support around them. Silicon Valley is different. I’m sorry to say if you have been fifteen years at Hewlett-Packard or Cisco, you’re not qualified to do any important job in the startup world. Every other part of the world people say “Wow, you work for GE or Citibank!” Here, they say “You’ve been working for GE and Cisco for fifteen years?” You’re not hirable by anybody trying to really experiment and innovate. You’re not qualified in any way if you’re at Cisco for fifteen years, or IBM for fifteen years, or Cargill for fifteen years, or United Healthcare for fifteen years.

I have gone through an exercise of trying to just see if I could find a large innovation coming out of big companies in the last twenty five years, a major innovation (there’s plenty of minor innovations, incremental innovations that come out of big companies), but I couldn’t find one in the last twenty five years. You look at retail, did Amazon innovate this or Walmart? For media, did ABC, NBC, CBS do it or Twitter/Youtube/Facebook? Did Boeing or Lockheed innovate space or SpaceX? Did GM which started early in electric cars and spent more money change cars or Tesla/Waymo/Uber? Did Wells Fargo or Bank of America change financial services or did Square/Stripe/Affirm do that? Did IBM change computing or Sun/VMWARE/Amazon AWS? Yes, the credit card 40–50 years ago was “credit on plastic” was the largest existing company, “barely large innovation” I could come up with, though I am sure there are a few others. And no, 3M does not qualify with the yellow sticky in my view. Rather, it’s the entepreneurs, startups, and Silicon Valley mindset that asks, “Why Not?” and does something about it.

**This is a section from “Reinventing Societal Infrastructure with Technology”. To read the previous section, click here.

Like what you read? Give Vinod Khosla a round of applause.

From a quick cheer to a standing ovation, clap to show how much you enjoyed this story.